New York City, NY asked in Mergers & Acquisitions for New York

Q: What are the advantages of a stock sale over an asset sale?

Related Topics:
2 Lawyer Answers

Jonathan R. Roth


A: The advantage of an asset sale to the Buyer is that the Buyer can avoid undertaking any unwanted liabilities of the Seller. The advantage of a stock sale to the Seller is that he can avoid any depreciation recapture from the sale of equipment. However, if done properly the asset sale can work as well as a stock sale for the Seller. The result is usually the creation of good will which the Buyer will amortize over 15 years. There are a lot of variations of these two sales and each has its advantages and disadvantages, especially if the Seller has a loss carry-forward that the Buyer wants to use against its operating profits. There are plenty of books on Mergers and Acquisitions that explain the various types of Mergers and Acquisition structures. Some are better for certain kinds of businesses than others.

Ali Shahrestani, Esq.

  • San Francisco, CA
  • Licensed in New York

A: There may be more risk with a stock sale, and there may be less value with an asset sale (if excluding stocks). More details are necessary to provide a professional analysis of your issue. The best first step is an Initial Consultation with an Attorney. You can read more about me, my credentials, awards, honors, testimonials, and media appearances/ publications on my law practice website, I practice law in CA, NY, MA, and DC in the following areas of law: Business & Contracts, Criminal Defense, Divorce & Child Custody, and Education Law. This answer does not constitute legal advice; make any predictions, guarantees, or warranties; or create any Attorney-Client relationship.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.